Democrats Could Fare Even Worse Next Time If They Don’t Fix Economy

By now it is clear to most analysts of the United States’ midterm election that the economy played a huge role in the Democrats’ losses. It is also pretty clear that the vote was a protest vote by people reacting to economic troubles, rather than an attitudinal change in the electorate towards a conservative political agenda.

This can be seen from both pre-election polling data and exit polling. For example, 58 percent of voters said that they were “trying to send a message about how dissatisfied they are with things in Washington.” But voters were more likely to agree with Democratic positions on Social Security, trade policy and other issues. This is despite the fact that an “enthusiasm gap” lowered Democratic turnout. As comedian Jon Stewart prodded Obama in his interview with the president: how did we go from “hope and change” to “please baby, one more chance?”

Still it is worth looking at this in some more depth. Political scientist Douglas Hibbs has looked at midterm congressional elections in the U.S. since 1950, and found that 92 percent of the variance can be explained with just three variables. The first two are just measures of how many seats and votes that the President’s party had prior to the current election. The third one is a measure of how the economy has done since the last election.

The President and his party have no control over the first two variables: These are basically just measuring the fact that the President’s party will lose more seats, the better it did in the previous election. This is partly because, for example, if the Democrats win more seats they inevitably have some representatives that are more vulnerable because they are in districts with more Republican voters.

Ignoring for a minute that the president and the Democrats could have done a lot more to fix the economy, Hibbs’ model would project about a 41 seat loss for the Democrats in this latest election.

Since the Democrats lost about 63 seats, they still did significantly worse than would be predicted. But most of their loss could be explained just by the votes they came in with and the state of the economy. And that was enough to lose the House (the Democrats had a 39-seat majority before the election).

Why does the economy play such a huge role in our Congressional elections? Well, of course it is very important to most people, who have to worry about their future employment prospects, retirement savings and other things that are dependent on the overall state of the economy, even if they currently have a job.

But there is another reason: Since the two major parties each have a base that will mostly vote for their candidates, most elections are being determined by “swing voters” – about 35 percent in this latest election. Most of these voters are choosing a representative with very little information – most of them know little or nothing about the candidates or how they stand on the issues. The performance of the economy is one of the few politically relevant realities that they do know something about: they can see what is happening in the labor market and other indicators. For this reason they will tend to punish the incumbent party and congressional representatives if the economy is perceived as doing badly.

In reality, the Democrats could have done a lot more to fix the economy – or at least tried. After subtracting off the state and local government budget tightening, the stimulus provided by the American Recovery and Reinvestment Act only made up for a small fraction – about one-eighth – of the private spending that was lost from the bursting of the real estate bubble. This was the Democrats’ fatal mistake.

Will they make the same mistake going forward? Barring unforeseen circumstances such as a steep decline in the dollar (which would boost the U.S. economy by reducing imports and increasing exports), the next two years of the U.S. economy do not look good. Even the White House is projecting more than 8 percent unemployment in 2012. If President Obama and the Democrats decide to find common ground with the Republicans on deficit reduction, it would likely make the economy even weaker.

Of course, since the Republicans now have the House, the Democrats have a chance to try to frame the likely failure of the economy as their fault – depending partly on what the Republicans do. And President Obama may get lucky and find himself up against someone like Sarah Palin in 2012. But it is not a good strategy when you have to hope for your opponents to defeat themselves.

The latest conventional wisdom is that another, more adequate stimulus package is off the table now that the Republicans control the House. But the President and his party had better find a way around that. At the very least they would have to fight very hard for what is needed – as they did not do in the last two years – and make it extremely clear that Republican obstruction is the obstacle to economic recovery. Otherwise, the most likely result in 2012 will be a repeat of what we just saw – only with more losses for the Democrats, possibly including the presidency.

Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. and president of Just Foreign Policy. He is also the author of the forthcoming book Failed: What the "Experts" Got Wrong About the Global Economy (Oxford University Press, 2015).